Cathay Pacific secures £4bn government-backed bailout
Cathay Pacific has announced a HK$39 billion (£4 billion) recapitalisation plan.
The carrier, one of the earliest and hardest hit by the coronavirus pandemic, said the deal would help maintain competitiveness.
The three-part plan, financed by the government of Hong Kong, is designed to provide Cathay with sufficient funds to withstand the industry-wide downturn, as well as a stable platform from which it will be able to conduct a wholesale review of operations.
The recapitalisation plan comprises three tranches.
In the first, Cathay will issue HK$19.5 billion in preference shares with detachable warrants to the Hong Kong government after requisite shareholders’ approval has been obtained.
The second will see the carrier launch a HK$11.7 billion rights issue to existing shareholders, while the third will see the Hong Kong government provide a HK$7.8 billion bridge loan facility.
The loan will be drawn down immediately.
Cathay chairman, Patrick Healy, said: “We are grateful to the Hong Kong government’s capital support, which allows Cathay Pacific to maintain our operations and continue to contribute to Hong Kong’s international aviation hub status.”
Cathay has experienced a number of challenges since last year.
Positive momentum from 2018 drove a strong first-half result in 2019.
However, since mid-2019, social unrest in Hong Kong has led to a sharp decline in passenger traffic.
This environment was exacerbated by the outbreak of the Covid-19 pandemic.
Most industry analysts are forecasting very gradual recoveries over a protracted period, and the International Air Transport Association is forecasting that it will be 2023 at the earliest before international passenger demand returns to pre-crisis levels.
Cathay Pacific is more vulnerable than some of its global peers, given that its airlines have no domestic network and are wholly reliant on cross-border travel.
That travel remains highly restricted and subject to quarantine constraints, with no prospects of a return to normal international travel arrangements in the near future.
Healy added: “Despite all these measures, the collapse in passenger revenue to only around one per cent of prior year levels has meant that we have been losing cash at a rate of approximately HK$2.5 billion to HK$3 billion per month since February, and the future remains highly uncertain.
“The infusion of new capital that we have announced today does not mean we can relax.
“Indeed, quite the opposite.
“It means that we must redouble our efforts to transform our business in order to become more competitive.”